Life Insurance Companies are Starting to Use Big Data for Premium Discounts

Life Insurance Companies are Starting to Use Big Data for Premium Discounts

For the most part, purchasing life insurance is pretty standard – you apply, the company will do a medical exam and then provide the insured/owner with terms and pricing for those terms. If you take up smoking or heroine after your exam, your rates don’t change. I always thought that was interesting, but if rates could change I bet the industry would look very different than it does today (my guess is that the industry would be a tiny portion of what it is today). Working in the life insurance industry I am always interested in industry changes, so I got very excited about a recent CNBC Article highlight a new program from John Hancock. The program rewards an individual’s commitment to on going health, specifically,

The program is set up similarly to frequent flier mile programs, with participants who exhibit healthy behaviors earning more points.

To get started, policyholders who opt into the program receive a free Fitbit that begins tracking their physical activity. The program also tracks other activities such as doctor visits, biometric results and flu shots.

The points then convert to a certain amount in savings on premiums and rewards from retail partners such as Hyatt Hotels, Apple and Starbucks.

Specifically, policyholders who reach 3,500 points are considered silver status and receive roughly 5 percent off their premiums. Gold is 7,000 points earned, with 10 percent off and platinum is 10,000 points, equaling a 15 percent discount.

This type of dynamic pricing could lead to lower costs for customers, but it raises the question of whether consumers are willing to relinquish more of their privacy to life insurers.

This is a win-win for consumers and insurance companies. The insurance company gets knowledge of either the improved or declining health of their policy holders. Enough of this information can only help actuary forecasts. At the same time, an insured has an opportunity to save money on bill that is likely not going anywhere any time soon (or hopefully doesn’t go away since the alternative is death in most cases).

I hope this program becomes widespread throughout the industry, I know I’d love to save on some of my premiums!

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Evan is the owner of My Journey to Millions which was started to track his journey from a broke debt ridden law school graduate to building a positive balance. Need more Evan? Follow him on Twitter, Contact him or get new posts directly to your email

My Journey to Millions

My Journey to Millions is an 8 year old personal finance blog focused on topics including basic personal finance issues, advanced insurance planning, high net worth estate planning. In addition, there is a particular focus on dividend growth investing and option trading.